Bill will hike diesel prices, Senate hears

| October 30, 2009

The American Trucking Associations First Vice Chair Barbara Windsor told the Senate Environment and Public Works Committee on Oct. 29 the current cap-and-trade proposal will increase the price and volatility of diesel fuel for the trucking industry without significantly reducing carbon emissions.

“ATA strongly supports efforts to reduce greenhouse gas emissions and make this country more energy-independent,” said Windsor, who is president and chief executive officer of Hahn Transportation in New Market, Md. “However, an economywide cap-and-trade system is not the answer.” Proponents of an economywide cap-and-trade system say increasing the price of fuel will reduce consumption, Windsor said, but that does not hold true in the trucking industry.

“In our industry, a higher fuel price does not translate into fewer miles traveled because the nation depends on trucks to deliver nearly 100 percent of the food, clothes and medicines that we use in our daily lives,” Windsor said. “Instead, this increase in diesel prices will raise logistics costs within the economy and hurt the American consumer.”

Cap-and-trade requires oil refineries to purchase emissions allowances that cover their direct refining operations and the amount of carbon produced by downstream combustion of the produced fuels. “The costs associated with obtaining these allowances will be passed on the fuel consumers in the form of higher prices,” Windsor said. “A major petroleum supplier to the trucking industry has advised that diesel fuel costs could rise by up to 88 cents. Should Congress move forward with a cap-and-trade carbon control system, oil refinery carbon caps should apply only to the refinery’s direct carbon emissions and not to the downstream combustion of the products they produce, such as gasoline, diesel and jet fuel.”

Cap-and-trade also will increase price volatility as carbon prices will fluctuate, and volatile fuel prices make it difficult for trucking companies to accurately predict expenses and pass them on to customers, said Windsor, who also testified that ATA is concerned with the support of various investment banks for cap-and-trade. These firms would profit from volatility in the energy futures markets and a carbon derivatives market, and Congress must reform commodity trading before creating new derivative carbon markets, she said.

Windsor’s testimony suggested alternative methods of reducing carbon emissions from the trucking industry. These alternatives are contained in ATA’s environmental sustainability plan, which targets reducing fuel consumption by 86 billion gallons and reducing the carbon footprint of all vehicles by nearly a billion tons over the next 10 years. The sustainability plan includes: a national 65 mph speed limit and governing new truck speeds to 65 mph or below; decreasing idling; reducing highway congestion through highway infrastructure improvements; increasing fuel efficiency through the U.S. Environmental Protection Agency’s SmartWay Program; promoting the use of more productive truck combinations; and supporting national fuel economy standards for medium- and heavy-duty trucks.

“Our plan can achieve real results with far less cost and disruption to our industry sector than under a cap-and-trade scenario,” Windsor said.